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Barclays (BCS - Free Report) reported a second-quarter 2023 net income attributable to ordinary equity holders of £1.33 billion ($1.66 billion), up 24% from the prior-year quarter.
The company recorded an increase in expenses and lower revenues in the reported quarter. Also, higher credit impairment charges hurt the results to an extent.
Revenues Decline, Expenses Rise
Total income was £6.29 billion ($7.87 billion), down 6.3% year over year.
Operating expenses (excluding litigation and conduct costs) totaled £3.92 billion ($4.91 billion), up 6.4% year over year.
The cost-to-income ratio was 63%, down from 75% a year ago.
In the reported quarter, Barclays recorded credit impairment charges of £372 million ($465.6 million), up 86% from the year-ago quarter.
Pre-tax income was £1.96 billion ($2.45 billion), up 31% year over year.
Segmental Performance Good
Barclays UK: Profit before tax was £781 million ($977.4 million), up 25% from the year-ago quarter. The rise was driven by higher total income.
Barclays International: Profit before tax was £1.39 billion ($1.74 billion), up 32% year over year. The rise was driven by the robust performance of the consumer, cards and payments division.
Head Office: The loss before tax was £208 million ($260.3 million), broader than the loss incurred in the prior-year quarter.
Balance Sheet Strong
Total assets as of Jun 30, 2023, were £1,549.7 billion ($1,962.2 billion), up 2.4% from the end of December 2022.
Total risk-weighted assets increased marginally from the Dec 31, 2022 level to £336.9 billion ($426.6 billion) as of Jun 30, 2023.
As of Jun 30, 2023, the Common Equity Tier 1 (CET1) ratio was 13.8%, down from 13.9% as of Dec 31, 2022.
Capital Deployment Update
Barclays announced a half-yearly dividend of 2.7 pence per share. It also intends to initiate a share buyback of up to £750 million.
2023 Guidance
Management expects the loan loss rate to be 50-60 basis points.
The Barclays UK NIM is expected to be less than 3.20%.
Over the medium term, the CET1 ratio is expected to be 13-14%.
Barclays expects to deliver a return on tangible equity of more than 10% and a cost-to-income ratio of low 60%.
Our View
Given Barclays’ restructuring and business-simplification efforts, its operating efficiency is expected to improve in the quarters ahead. The company’s cost-saving efforts will likely keep aiding financials. However, a challenging operating backdrop is expected to put pressure on revenue growth in the near term.
Performance & Earnings Release Date of Other Foreign Banks
Deutsche Bank (DB - Free Report) reported second-quarter 2023 profit attributable to its shareholders of €763 million ($831 million), down 27% from the year-ago quarter. The Germany-based lender reported a profit before tax of €1.41 billion ($1.53 billion), down 9% year over year.
DB’s results were largely driven by higher net revenues and a strong capital position. However, higher provisions for credit losses and a rise in operating expenses were offsetting factors for DB.
HSBC Holdings plc (HSBC - Free Report) is slated to announce its second-quarter 2023 numbers on Aug 7.
Over the past seven days, the Zacks Consensus Estimate for HSBC’s quarterly earnings has been unchanged at $1.50, implying an 11.1% jump from the prior-year reported number.
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Barclays (BCS) Q2 Earnings Improve Y/Y Despite Lower Revenues
Barclays (BCS - Free Report) reported a second-quarter 2023 net income attributable to ordinary equity holders of £1.33 billion ($1.66 billion), up 24% from the prior-year quarter.
The company recorded an increase in expenses and lower revenues in the reported quarter. Also, higher credit impairment charges hurt the results to an extent.
Revenues Decline, Expenses Rise
Total income was £6.29 billion ($7.87 billion), down 6.3% year over year.
Operating expenses (excluding litigation and conduct costs) totaled £3.92 billion ($4.91 billion), up 6.4% year over year.
The cost-to-income ratio was 63%, down from 75% a year ago.
In the reported quarter, Barclays recorded credit impairment charges of £372 million ($465.6 million), up 86% from the year-ago quarter.
Pre-tax income was £1.96 billion ($2.45 billion), up 31% year over year.
Segmental Performance Good
Barclays UK: Profit before tax was £781 million ($977.4 million), up 25% from the year-ago quarter. The rise was driven by higher total income.
Barclays International: Profit before tax was £1.39 billion ($1.74 billion), up 32% year over year. The rise was driven by the robust performance of the consumer, cards and payments division.
Head Office: The loss before tax was £208 million ($260.3 million), broader than the loss incurred in the prior-year quarter.
Balance Sheet Strong
Total assets as of Jun 30, 2023, were £1,549.7 billion ($1,962.2 billion), up 2.4% from the end of December 2022.
Total risk-weighted assets increased marginally from the Dec 31, 2022 level to £336.9 billion ($426.6 billion) as of Jun 30, 2023.
As of Jun 30, 2023, the Common Equity Tier 1 (CET1) ratio was 13.8%, down from 13.9% as of Dec 31, 2022.
Capital Deployment Update
Barclays announced a half-yearly dividend of 2.7 pence per share. It also intends to initiate a share buyback of up to £750 million.
2023 Guidance
Management expects the loan loss rate to be 50-60 basis points.
The Barclays UK NIM is expected to be less than 3.20%.
Over the medium term, the CET1 ratio is expected to be 13-14%.
Barclays expects to deliver a return on tangible equity of more than 10% and a cost-to-income ratio of low 60%.
Our View
Given Barclays’ restructuring and business-simplification efforts, its operating efficiency is expected to improve in the quarters ahead. The company’s cost-saving efforts will likely keep aiding financials. However, a challenging operating backdrop is expected to put pressure on revenue growth in the near term.
Barclays PLC Price, Consensus and EPS Surprise
Barclays PLC price-consensus-eps-surprise-chart | Barclays PLC Quote
Currently, Barclays carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance & Earnings Release Date of Other Foreign Banks
Deutsche Bank (DB - Free Report) reported second-quarter 2023 profit attributable to its shareholders of €763 million ($831 million), down 27% from the year-ago quarter. The Germany-based lender reported a profit before tax of €1.41 billion ($1.53 billion), down 9% year over year.
DB’s results were largely driven by higher net revenues and a strong capital position. However, higher provisions for credit losses and a rise in operating expenses were offsetting factors for DB.
HSBC Holdings plc (HSBC - Free Report) is slated to announce its second-quarter 2023 numbers on Aug 7.
Over the past seven days, the Zacks Consensus Estimate for HSBC’s quarterly earnings has been unchanged at $1.50, implying an 11.1% jump from the prior-year reported number.